forms_of_business_organizationfandomcom-20200213-history
Group 8
'Sole Proprietorship - Tommy Huang' Description: * A simple business owned by just one person ** They can still hire others to work for them * Legally shares status with the owner ** Costs paid or revenue earned by the business might incur personal costs or gain for the owner Advantages: * Extremely simple to set up and run * Not a separate legal entity (both an advantage and disadvantage) ** This makes things such as doing taxes much simpler since the owner does not have to do taxes twice (once for themselves and another one for the business) * The owner of a sole proprietorship can easily and quickly make decisions, as they do not need anyone else to agree with them * Any items used in your business can also be used personally (e.g. your office be in your home) * Profits earned do not have to be shared Disadvantages: * Greater risk due to unlimited liability ** If the business goes into debt, your personal items may also be taking away, unlike in limited liability, where only the money that was invested would be lost *** For example, if your business got sued, you might have to sell personal items to cover it * Not a separate legal entity (both an advantage and disadvantage) ** Unlike businesses such as corporations, the lack of a special legal status means that some exclusive benefits are not given *** For example, a corporation can sell “shares” to fundraise, whereas a sole proprietorship cannot (see “corporation” below for more information) The Accounts Unique to the Form of Ownership: *Cash *Bank *Capital **Equipment and assets owned by the company Partnership - Ryan Seto A partnership business organization is one that is: * Run by 2 or more individuals as co-owners * Each owner has invested in the company * Owners share money, resources, and skills A partnership is similar to a sole proprietorship in the sense the profits and losses are divided between the partners, based on their agreement. The different types of partnerships are: * General partnership - which consists of partners that take part in day to day activities and are liable as owners for debts or potential lawsuits * Limited partnership - consists of one general partner who manages the business, and other limited partners that don't participate in business operations (no liabilities) * Limited liability partnership - same as the limited partnership, except that there can be multiple general partners Advantages of a partnership: * Multiple owners are better than one (more ideas and input) * Share costs among owners * More capital, resources, and skills are available to the business * Little external control of business (no shareholders like in a corporation) Disadvantages of a partnership: * Possibility of disagreement between partners (avoidable in a sole proprietorship) * Each partner is liable for another partner's actions * Partners are "jointly" liable for the partnership's debts, meaning one partner is responsible for their own debts and the partnership's debts Accounts unique to a partnership: * Abundant amount of resources due to the fact that there are multiple owners and investors ** Resources include: cash, bank, assets, capital * Accounts payable - the amount of money the company owes to suppliers (liabilities) * Accounts receivable - the amount of money owed to a company by its debtors Corporation - Zhi Ou Yang A corporation is a distinct legal entity from its owners. A corporation has many responsibilities that sole proprietorships and partnerships also have, including the right to enter contracts, loaning and borrowing money, hire workers, own assets, pay taxes, and be sued. Although corporations have many responsibilities and rights as other forms of business organizations, there are differences in how a corporation is run. Format In a corporation, there is a hierarchy of owners which consists of shareholders, a board of directors, a CEO (chief executive officer), executives, and workers. In most large corporations, there are shareholders who buy stocks and own a small portion of the company. Then there is the board of directors which makes all the executive decisions on how to run the organization. Above them all is the CEO who oversees the corporations decisions and actions. Advantages * Limited liability ** Unlike sole proprietorship and partnerships, shareholders can only be held liable for the number of shares they own. * Possible lower tax rates * Can sue in the company's name ** The company is a legal entity which can be sued and can sue * Business Continuity ** A plan of action to ensure that a business can continue to operate even if disasters or unforeseen events were to occur * Widespread reputation and fame. Disadvantages * Long time to make decisions ** Decisions need to be approved by a majority of shareholders * interests of the shareholders rather than the consumers (shareholder are consumers essentially) * Annual maintenance from lawyers and accountants ** (In other forms of business organization they can do it themselves though it is not highly recommended) Example An example of a massive corporation is Microsoft. Microsoft is a large corporation with many shareholders who have decided to invest in the company and its products. The number of Microsoft shares in February 2018 is over 5 billionhttps://www.nasdaq.com/symbol/msft/ownership-summary with each share being worth around 85$, Microsoft currently is worth around 560 billionhttp://money.cnn.com/2017/12/11/investing/microsoft-trillion-dollar-market-value/index.html. Equity Accounts * Capital accounts * Bank accounts * Cash accounts Sources https://www.entrepreneur.com/encyclopedia/sole-proprietorship https://www.justia.com/business-formation/docs/corporation-advantages-disadvantages.html http://gilreathsearch.com/proven-advice-ceos/ https://www.allbusiness.com/forms-of-business-ownership-674-1.html/2 https://www.investopedia.com/terms/c/corporation.asp